Recent cases on both sides of the Atlantic have addressed the issue of how much damage should be compensated when awarding damages for patent infringement. In both cases the issue was whether loss of profits on goods or services other than those resulting from the direct infringement were something for which the patentee should be compensated.

The U.S. Court of Appeals for the Federal Circuit in Rite-Hite Corp. v. Kelley Co., Inc. held that an infringing party had to pay damages in the form of lost profits not only for the product that was covered by the patent but also for products that directly competed with the infringing device even though that product is not covered by the patent-in-suit.

Rite-Hite sued Kelley Company for infringement of Rite-Hite's patent which covered a device for securing a vehicle to a loading dock to prevent the vehicle from separating from the dock during loading and unloading. After finding that Kelley's product infringed the patent, Rite Hite sought damages calculated as lost profits, inter alia, for two types of vehicle restraints: the first device was for the invention covered by the patent and the second device was not covered by the patent-in-suit. The second device was covered by a different patent also owned by Rite-Hite. The lower court had found that "but for" Kelley's infringement, Rite-Hite would have made more sales of both types of devices. Kelley appealed this ruling arguing that the damages statute, 35 USC 284, does not provide for damages based on lost sales of the product not covered by the patent-in suit.

In affirming this aspect of the lower court's holding of calculation of damages, the Federal Circuit referred to the damages statute, 35 USC 284:

According to the Federal Circuit, this statute mandates that a claimant receive damages adequate to compensate for infringement. The phrase "in no event less than a reasonable royalty is not to direct the form of compensation but to set a floor below which damage awards may not fall." The Federal Circuit stated that "the general rule for determining actual damages to a patentee that is itself producing the patented item is to determine the sales and profits lost to the patentee because of the infringement." The Federal Circuit said that to recover lost profits and damages, the patentee must show a reasonable probability that "but for" the infringement it would have made the sales that were made by the infringer and went on to state that the damages awarded must be viewed in terms of reasonable, objective foreseeability. The Federal Circuit agreed with the lower court that the lost sales of the second device that directly competed with the infringing product were reasonably foreseeable.

The Federal Circuit did note that the only substitute for the patented device was Rite-Hite's other patented product and since this was patented it was not an "acceptable, non-infringing substitute and it was only available from Rite-Hite and Rite-Hite would not have lost the sales to a third party." The Federal Circuit stated that if the second device had not been patented and was found to be an acceptable substitute, there might have been a different result.

The dissent disagreed and took the position that damages should be awarded for only the product that was covered by the patent-in-suit, not for an additional competing product, whether patented or not.

In a recent decision of the English Patent Court in Gerber Garment Technology v. Lectra Systems Limited the issue of indirect damages was also addressed. The issue to be decided was the amount of damages to be awarded to Gerber after it was found that automatic cutting machines for fabrics (CAM machines) sold by Lectra infringed Gerber's patents and whether, in calculating the damages, Gerber would be compensated for damages that were outside the scope of the patent claims.

In addition to seeking damages for lost profits on the CAM machines within the scope of the patent claims, Gerber sought lost profits on machine sales by Lectra, claiming that it would have made all the sales made by Lectra, lost profits on computer assisted design (CAD) machines that could be used with CAM machines, lost profits on spare parts for the machines, lost profits from servicing of the machines, lost profits on sales resulting from price depression resulting from the need to compete with Lectra, lost profits on machines sold after expiration of the patent but negotiated prior to the expiration of the patent, profits on lost sales of its subsidiaries and royalties on sales in Ireland of machines shipped via the UK by Lectra.

Lectra considered that the damages should be based only on lost sales of the CAM machines that were within the scope of the patent claims.

The court held that the measure of damages was the "sum of money which will put the injured party in the same position as if he had not sustained the wrong." The court stated that, where secondary losses are a foreseeable consequence of patent infringement, the secondary losses can be recovered. The object of damages is to compensate the patentee, not to punish the infringer. "When the patentee has exploited his patent by manufacture and sale he can claim (a) lost profit on sales by the defendant that he would otherwise have made (b) lost profit on his own sales if price reductions are forced by infringement, and (c) reasonable royalty on sales by the defendant that would not have been made by patentee."

The court allowed most of Gerber's claim. Gerber was entitled to profits from lost sales of the CAM and CAD machines and would be entitled to damages from the sales lost from its subsidiaries. Gerber expected to make sales of ancillary equipment following the primary sales and obtain a good proportion of the service contracts and sale of spare parts and the court allowed lost profits on these items. The effect of price depression due to Lectra's presence in the market was also to be taken into account in calculating damages. The court stated that an offer near expiry of the patent to take orders to supply after expiry is not an infringement if it causes the patentee's customers to wait until the patent expires. However in this case, the court noted that Lectra and its customers involved in the near-expiry negotiations did not care whether delivery took place before or after expiry so these undertakings would be treated as an offer to supply during the life of the patent. Gerber was also entitled to royalties for sales that Lectra made to Irish customers. There were two other minor infringers in the market and the court would take into account their sales and their effect on price depression when calculating damages.

From these decisions it can be seen that a patentee will not always be limited to damages resulting from sales of items that are found to infringe the patent. The patentee may also be able to recover damages that are a foreseeable result of the patent infringement.